European firms confident in Vietnam’s ability to navigate global trade tensions

European firms confident in Vietnam’s ability to navigate global trade tensions

The latest Business Confidence Index (BCI) released by EuroCham Vietnam offers a snapshot of guarded optimism among European businesses in the country.

Recorded at 64.6 for Q1/2025, the BCI suggests relative confidence among European companies in Vietnam, but with a clear undercurrent of uncertainty. Many respondents cited “waiting for Washington” as a central concern, reflecting apprehension about potential external shocks.

The survey, conducted by Decision Lab from March 10-27, preceded the announcement of new tariffs by the United States, as well as other rapid changes in the global trade landscape.

Vietnam’s ongoing economic reforms and structural improvements helped bolster positive sentiment at the time of the survey. European firms recognised these efforts and, broadly speaking, responded with a neutral-to-positive stance on the business climate. However, even then, caution was already setting in. Anticipation of external shocks, particularly from Washington, was already present, highlighting that global policy moves were already weighing on the minds of investors.

EuroCham chairman Bruno Jaspaert commented, “The findings indicate that most European firms did not anticipate such drastic tariff measures and remained confident in Vietnam’s diplomatic ability to navigate global trade tensions. Around two thirds of respondents reported a neutral stance, neither overly optimistic nor overly apprehensive."

He further noted that the survey results predate the United States’ major trade policy announcement on its so-called “Liberation Day”, underscoring the importance of interpreting the data within its specific timeframe.

The data reflects a near balance in outlooks on supply chain strategies (+1 per cent) and access to financing (+1 per cent), suggesting a conservatively favourable view of the business environment.

Nonetheless, concerns were already emerging. Roughly 39 per cent of surveyed businesses anticipated pricing strategies such as tariff-related cost changes and operational expenses to be key challenges. Another 36 per cent projected moderate to significant difficulties in market demand and revenue projections.

“Despite this, most businesses had not yet adjusted their investment, hiring, or compliance strategies, reflecting a "wait-and-see" approach in light of the anticipated but then-uncertain trade developments," EuroCham chairman remarked.

A less negative outlook, but neutrality prevails

Business sentiment among European companies operating in Vietnam in Q1/2025 showed modest signs of improvement compared to previous quarters. 42 per cent of respondents reported a neutral stance on the business environment, suggesting a preference for vigilance amid ongoing changes.

“This quarter’s BCI captures a rare and revealing moment. Just before the global trade winds shifted, we saw a sentiment that was steady but cautious, optimistic but watchful,” observed Thue Quist Thomasen, CEO of Decision Lab. “The data shows European businesses in Vietnam were, at that point, holding their breath – still confident in the fundamentals, but increasingly alert to the turbulence ahead. In times like these, a data-driven, factual approach is more important than ever. It allows business leaders to cut through the noise and make decisions grounded in evidence, not speculation.”

At the time of the survey, Vietnam’s solid economic growth and positive GDP forecasts (cited by 37 per cent) provided a degree of reassurance. Respondents also highlighted trade and investment opportunities (24 per cent) and a rebound in consumer spending and tourism (18 per cent) as favourable signs.

However, circumspection remained prominent in the business psyche. Over half (52 per cent) of businesses cited global economic slowdowns and shifting trade dynamics as primary concerns. Another 36 per cent pointed to uncertainty in governance and regulatory clarity as factors tempering their outlook.

Investment appeal needs sustained improvements

While 68 per cent of European business leaders said they would recommend Vietnam as an investment destination, highlighting their long-term commitment. This figure reflects a 7-point drop from Q4 2024 when 75 per cent expressed similar confidence. This suggests a more reserved view of Vietnam’s investment climate as firms adopt a more measured approach.

Respondents identified key areas where further progress would strengthen Vietnam’s appeal to foreign investors, with infrastructure development (37 per cent) as the top priority for enhancing Vietnam’s investment attractiveness. Other points noted were streamlining administrative processes (29 per cent) to reduce bureaucratic inefficiencies; easing visa and work permit procedures for foreign experts (24 per cent); as well as greater clarity in laws and stronger law enforcement (21 per cent). These priorities indicate that while commitment remains, European firms are looking for tangible improvements to match their long-term confidence.

Vietnam’s ongoing government restructuring process was met with neutral to cautiously optimistic responses. While most businesses did not expect immediate improvements, many expressed hopes for progress by 2026. Key anticipated improvements include a shift to digital submissions and approvals (45 per cent), faster processing times for administrative procedures (26 per cent), and decentralisation of decision–making at local levels (25 per cent).

Regarding the provincial mergers, over 40 per cent of respondents believed these changes could eventually improve administrative efficiency and reduce regulatory complexity. Still, between 55-63 per cent expressed uncertainty about how these shifts may affect investment planning, market expansion, and workforce strategies. Interestingly, 44 per cent suggested their operations would function best if Vietnam reduced its number of provinces to below 30, pointing to a preference for leaner governance.

The upcoming National Assembly session in May is expected to introduce changes to laws such as the Special Consumption Tax and Advertising Law, prompting businesses to remain vigilant. Most respondents indicated a “watchful waiting” approach.

Looking ahead to the new Data Law, which is due to take effect in July, the mood is similarly cautious. While most businesses expressed a neutral stance, 30 per cent anticipated challenges, five percentage points higher than the 25 per cent who saw potential benefits. The primary concern surrounding cross-border data transfer restrictions is compliance complexity and administrative burdens (42 per cent). Other closely ranked concerns are government access to sensitive business data (40 per cent), restrictions on international data processing and storage (39 per cent), and increased operational costs for data localisation (28 per cent).

Looking ahead

As Vietnam navigates structural reforms and external challenges, European businesses are demonstrating a continued but guarded confidence in the country's trajectory. Bruno Jaspaert, chairman of EuroCham, reflected, “The resilience of Vietnam’s economy is not just built on growth figures but also on its ability to adapt, both structurally and diplomatically, amid shifting global currents. While recent developments, including trade policy shifts, introduce new complexities, the broader trajectory remains one of engagement and opportunity.”

European businesses have long valued Vietnam’s agility in international relations, a trust underscored by its delicate yet decisive approach to global challenges. Jaspaert also reaffirmed EuroCham’s ongoing role as a partner and advocate, “As uncertainties unfold, EuroCham stands firm in its commitment to ensuring that European businesses are not only heard but also supported in navigating these changes. Beyond advocacy, we are here to champion solutions, working alongside policymakers to foster a business environment that is both competitive and sustainable. The road ahead may demand adaptability, but one constant remains: Vietnam and Europe’s shared pursuit of economic resilience and growth.”

VIR